Endogenous Market Structure and the Cooperative Firm
Brent Hueth, GianCarlo Moschini
May 2014 [14-WP 547]
When the threat of entry by followers includes cooperative firms, the maximum fixed cost that a profit maximizing leader can endure is endogenous. The aggressive strategy required for entry deterrence curtails the leader’s expected profit and can discourage its initial entry. In such circumstances a cooperative firm may yet be viable, despite having a cost handicap and no first-mover advantage.
Keywords: cooperatives, endogenous entry, entry deterrence, nonconvexity.
JEL codes: L22, P13
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